BRANDER AND MKENNA v. Phillips and Company

*128 Mr. Justice M'Lean delivered the opinion of the Court. 'This is a case on error from the Circuit Court for the district of South Alabama. Brander and McKenna, in 1833, 1834, 1835, were commission merchants at New Orleans.; and acted'as factors and agents of William.E. Phillips and Company, of Huntsville, Alabama, in the sale of cotton, and made advances thereon.- On all sales they were to receive two and a half per cent.- for commission, and the Same amount for advances. ■ In August," 1834, Phillips and Company were indebted to Brander.. and McKenna, in the sum of -one thousand three hundred and fifteen dollars and fifty-seven cents, for. advances. On the 15th of the same month. John Williams, agent for Brander- and M'Kenna, agreed to advance Phillips and Company the sum of eight thousand dollars on bills, to be drawn between the 20th of April, and the 31st of July, 1835, by them, and any two. of ■ pix persons named; amorig whom were R. Horton, and N. Terry, two:of the defendants in error.. Between the 15th of August, 1834, and the 31st of July, 183., several shipments of cotton were made to the plaintiffs by the defendants, and several bills Were drawn by-them, some-jointly with Horton and Terry, arid others without them; all of which, were, accepted by the plaintiffs. Thesé bills, including the advances previously made, amounted to the sum of twenty-nine thousand seven hundred and ninety-five dollars and sixty-five cents. The proceeds of the shipments of cotton to mee.t thése advances, amounted to the sum of twenty-two .thousand four hundred and sixty dollars and forty-three cents. 'The plaintiffs applied the proceeds of the cotton to-the liquidation of the bills'drawn by Phillips, and Company, to the exclusion of those drawn by. them jointly with'Horton and Terry; ’ and as me acceptances exceeded the proceeds of the cotton, this action was commenced on a .bill due 4th June, 1835, for'three thousand dollars drawn by the defendants. On the trial, the Court instructed the jury that, if they bélievéd from the evidence that; at the maturity of. this bill, Brander and Mdferina had sufficient, funds of Phillips and Company hi their hands to. pay it, and believed Horton and Terry to be accommo *129 dation drawers and securities only, and knew this at the maturity of this bill;.then, in the absence of any instructions from Phillips and Company, in regard to the application of the funds, Brandar and M'Kerma were .bound to apply them to pay this bill, and could not hold them- to meet the payment of the bill drawn oii them by Phillips and Company, which had been, accepted, but was not then .due.. And that if, when this bill betiame due, the-funds of. Phillips and Company, in the hands of the acceptors, were sufficient to pay it } the bill was extinguished, and recovery could not be had on it. - To this -instruction an, exception was taken, and- the plaintiffs in error contend, that they had a right to hold , the cotton-and .it» proceeds to meet- all outstanding liabilities, which they had -incurred on account of Phillips and pompany; and, that they had a right so to. marshal the securities, in the absence of any expresa agreement on the subject, as to save themselves from loss. . Where, a factor makes advances, or incurs liabilities on a consignment of goods, if there be no special agreement,, he may. sell the property in. the - exercise óf a sound discretion, according to -general usage, and reimburse himself out of the proceeds of. the sale; and the consignor has no right to intertere. The lien ofa factor for advances and liabilities incurred, extends not only to. the property consigned, but, when sold, to the proceeds of the sale in''the'hands of the vendee, and the securities thetefor in.,the hands of the factor. Drinkwater v. Goodwin, Cowp. 251; Haughton v. Matthews, 3 Bos. & Pull. 489; Brown v. M'Gran, 14 Peters, 495; Story on Agency, 380. But the case under consideration does not turn upon this principle. The liabilities of the plaintiffs exceeded the- proceeds of the property consigned: and,the question to be answered'is, whether they can claim a reimbursement-from .Horton and Terry, who were bound jointly with Phillips and Company, in certain bills amounting to eight thousand dollars.. Other bills to a much larger amount, drawn by Phillips and Company, without security, were accepted By the plaintiffs, several .of which- were not due, when the bill in controversy became payable: and the instruction of the Circuit Court to the jury was,-if at that time the plaintiffs had in their hands funds of Phillips, and Company, of a sufficient amount to pay this, bill, and they knew that Horton *130 aq.d Terry .-were. accommodation drawers, .they were bpund to pay it. When the• plaintiffs accepted this and the other bills, were they not aware of their respective amounts and, the times they became due? And were they not hound to take up the bills .at maturity? Of this there can he“no doubt.. The- bills drawn subsequently to Vthe one under consideration, amounted to fifteen thousand dollars, all of which were accepted by the plaintiffs; Were these, acceptances made, to any extent, on the credit of Horton and Terry? Thiá has not been contended. On what ground then can this action- be sustained? The application pf, payments by -the creditor, where no direction is given by the debtor, has no' relation to the present.casé. ' Had the bills become .payable at the sanie tipie, on acceptances made on the same day; the plaintiffs might .have 'insisted on applying the funds in their hands td the payment of the notes without securities.- But this-would' have been-a very different •case from the onte now. before us. After having accepted the bill under consideration, payable at a time stated, the plaintiffs accepted other hills, paykblbat a more - remote period. Now, the contract/by the acceptors was, that they would pay these bills as they respectively became due. And .this they were bound tó do, so long as the funds .of the consignors in their hands remained unexhausted. A bill became extinguished so soon Us if was paid by the plaintiffs; with the funds of Phillips and Company;' And this principle applies as strongly to those bills signed by the, accommodation drawers, as to others. - Could the plaintiffs .lay a foundation for a recovery,against Phillips and Company,'by showing payment of a hill drawn by them, out of their own funds ? . This would not. be pretended. And yet this. is the principle contended-' for in the present case. The liability-of the accommodation drawers was as completely discharged, on the payment of the hill in question, as that of- the , principals. . The relation of factors which the plaintiffs bore-, to Phillips and Company, gave them no power to vary their acceptances; The cotton consigned was to meet the payments of the hills, as they became due. This was known to Horton and Terry; .and it- may well be supposed that their - liability was incurred in-virtue of this *131 arrangement. But the plaintiffs, by. appropriating the proceeds of the .cotton to the payment of future liabilities, have violated their contract,-endeavoured to defeat the just reliance of.the. sureties, and charge them with the payment ,of the hills which, they.guarantied. This tlie plaintiffs cannot do. It would he a great hardship, .if not a'fraud on the sureties.. No lien, can be regarded or enforced under such circumstances. The lien of a factor depends upon legal principles, founded on equitable considerations, and, can he. held valid on no other grounds. We think that the instruction of the Circuit Court was correct ; and the judgment is, therefore, affirmed.' This 'cause .came .on to be‘heard on the transcript,of the record from the Circuit Court of the United States, for the southern' district of Alabama, and Yas -argued by counsel.'' consideration whereof, it js now here ordered'and ádjudgéd-by this.Court,;that the judgment of- the - said Circúit Court in this' cause be, and thé same.is hereby,.affirmed, with'costs.